The Linedata Exchange programme is being held this year at showcases in Hong Kong, Paris, London and New York. Christopher Marchant was at the London event, at the Sea Containers hotel complex on the River Thames, which featured talks from professionals in the asset management, leasing and insurance industries.
A panel debate was held on how document digitisation and analysis are driving operational excellence in lending and leasing.
It featured Thomas DeLuca, chief executive officer at AMP Credit Technologies, Peter Hunt, Growcap director and former chief operating officer at Investec Asset Finance, and David Betteley, former managing director at Vauxhall Finance, senior vice-president at Toyota financial services and global financial services director at Jaguar Land Rover.
DeLuca’s opening presentation contained a quote by FW Lancaster from 1978: “A paperless society is rapidly approaching. Ignoring this fact will not cause it to go away.” A photograph showing a paper filing system from the loan-origination system of an SME bank-owned asset finance company in 2019 showed that the prediction was somewhat ambitious in its timeframe.
“At the moment, all businesses have paper statements, and whatever is produced on paper comes from an electronic system,” said Hunt. “There are questions around whether this model can continue in its present form, or if will it have to go through some kind of metamorphosis upon full digitisation.”
AMP Credit Technologies operates the Credit Analysis Information and Risk Operations System (Cairos), a loan-origination and portfolio-servicing platform.
Cairos allows companies to digitise handwritten documents such as loan applications. Documents can be scanned at an office or uploaded by customers through the web or mobile device. After conversion into digital format, they are stored in a document management solution and subject to optimal character recognition (OCR) processing. Using OCR, scanned paper and PDFs can be transformed into searchable data.
As to what benefits Cairos might carry for the asset finance industry, DeLuca said: “The idea of the system is to create the rails upon which a lender can build workflows to automate the methodology of origination. Workflows as they exist do not allow a customer to conveniently add their username or password to allow access from the bank account.
“As workflow origination is the end goal, then AMP Credit can create a whole platform or solve very specific issues. If the day comes where paper for an origination journey is available in data form, the system is designed to plug in the data that comes through, stopping the technology from becoming obsolete.”
The digitisation process as presented through technologies such as Cairos may also provide opportunities to outsource a number of processes and use the shared service model. Yet when it comes to companies implementing or enhancing document digitisation and analysis capability, questions remain around the appropriate speed of adoption.
Hunt said: “The asset finance market is fairly fragmented, so there are a lot of organisations where there is insufficient scale to necessarily implement a number of the things discussed today.
“A technology framework needs to be identified, in terms of what technologies are used, how this is going to be done and in implementing these solutions. If there is a belief that data is an asset and all focus is therefore on a point solution, what will be solved will be in the credit decisioning process alone. If this occurs, digitistion has lost all the richness of the data downstream, so there may need to be a more holistic consideration, hence a need to go for a framework approach.”
According to DeLuca: “Framework is the right thing, thinking back to the picture of loan origination files in a present-day SME asset finance company. In that case, the client has included the capture of paper documents into a document management system without reading and redigitising. Document digitisation is a tool that captures paper and online documents, automatically extracts information from it, and analyses it for the next stage of the process. Companies can get the framework straight, and then build the digitisation in as they go.”
Technological development has an inevitable effect on the job market and further seminal economic disruption. As for how to deal with these considerations relating to the financial services sphere, Betteley said: “The type of automatic underwriting that can be done in the SME area is very limited. If you are in the retail area, you can automate the decision making; in the SME area, it is actually much more difficult.
“The conclusion was anything that was over £25,000 needed some kind of human oversight. So don’t run away with the idea that AI is going to get rid of all the credit underwriters any time soon.”
Likewise, Hunt did not see digitisation as having a seismic effect on the working nature of asset finance companies. “It is a classic change management challenge,” he noted. “You’re implementing change, you’re implementing technology improvement and you need to take the organisation with you. That’s not a new problem. It’s something that has been going on for years and no different here than it’s ever been.”
Digitisation is not just about improving costs, but speed. Many clients measure how quickly they can onboard new customers and how they can cut down on the in life cost of servicing. With this in mind, automating and having a straightforward process could have a dramatic effect.
DeLuca noted that by using AMP Credit Technology, Standard Chartered went from 2.5 man days of effort used in the onboarding process for a customer to less than an hour. On the speed of the decisioning process, Hunt said: “That might not be the biggest benefit of digitisation. For SME lending, if you are looking at the ‘time to yes’, a lot of lending is undifferentiated. That speaks to being able to allow the customer to relax knowing they have the deal sorted and don’t need to go searching anywhere else.
From this point, you start to see what the incremental profit that you’ve gained from that is, and it is often more than the same thing you get from improving your operations.”
As to whether AMP Credit is helping clients to gather the old type of screen-scraping data and social media data as well as digitising hard data, DeLuca stated: “The starting point for clients is the digitised workflow, so when the proposal comes in it is captured electronically and entered into a system where the credit information is pulled, and further forms of data collection may be utilised.”
He added: “An issue relates to who exactly is going to capture the username and password. If it is the broker, the applicant is entering his bank account details or password of the dealership and it is done on the back end. In many cases the workflows aren’t designed for that.”
On the question of what benefits document digitisation could bring to the customer, Betteley noted: “If you are a customer who is buying something, then you will want the process to be as convenient as possible. Customers always start their journey online now, so with finance applications this can be a case of an offline to online translation.
“If you start your journey online and then at some stage in the process have to start looking at your filing cabinet at home, scanning it in and then sending it in, that’s actually a very inconvenient process. This is forcing an arduous ordeal that’s really difficult for most customers. Getting access to electronic records is important because it’s very inconvenient for customers to find paper to actually scan it to you.”
DeLuca said: “There is a very big difference between a consumer loan versus a limited company. For a limited company there is a lot of information available because it is more spread out, more diverse and less reliable because a lot of it will exist only as paper. Document digitization and OCR could be hugely beneficial is this arena.”
A move to an online-only sphere is perhaps inevitable, but certainly not as quick and easy as predicted decades ago. The financial sector still has to contend with a range of issues, from privacy protection to cost-benefit analysis.
Nevertheless, this is a trend that seems to be going only one way, as evidenced by systems such as Cairos and the attention to the issue from the entire leasing industry.